Investors urge fat cat bosses to keep executive pay in check during cost of living crisis
Leading institutional shareholders are urging fat cat owners to keep their pay in check during the cost of living crisis.
The Investment Association (IA), which represents fund managers and other urban investors with £10 trillion in savings on their books, told London-listed companies to show “extra caution” in raising the salaries of well-paid executives.
The warning shot comes just days after figures from PwC showed that FTSE 100 bosses have seen their average wages rise to £3.9 million, while data from the Money and Pensions Service revealed that one in four adults pay less than £100. has savings.
Executive pay: The Investment Association told London-listed companies to show ‘extra caution’ in raising the salaries of well-paid executives
Andrew Ninian, director for stewardship and corporate governance at the IA, said: “As the cost of living hits UK households, investors want companies to exercise restraint on executive pay and bonuses, and ensure executive pay packages are are weighed against the experiences of their wider workforce, customers and other stakeholders.
“While we know from our conversations with companies that many are targeting pay increases for lower-paid employees, it is imperative that all companies think carefully about how they award rewards.”
The unusually blunt letter sets the stage for a bloody season of annual general meetings next year.
Shareholder revolts have already gained momentum this year as investors objected to compensation packages from Marks & Spencer, Premier Inn owner Whitbread and data and events company Informa.
Retaining and motivating all employees, not just executives, will be critical to the survival of many companies, the IA said.
The IA has also asked companies to investigate any ‘windfall gains’. Many bosses were awarded long-term stocks in 2020 – when stock prices were low due to the pandemic.
With many stock prices bouncing back, prices could be worth huge sums if bosses can access them in 2023 and bring them “windfall gains.”
If a remuneration committee “has decided not to adjust for windfall gains, it must explain and disclose its rationale,” the IA said.
But some in the city worry that the focus on executive pay — coupled with the burden of regulatory compliance — is deterring the best candidates from running publicly traded companies.
Instead, they’re going to drive private equity-backed companies away from public markets, according to Mark Freebairn, head of corporate practice at recruiter Odgers Berndtson.
“If you’re a chief executive and a private equity firm comes along and gives you the chance to run a company and do the work you love for the same amount of money, but without any control, without ticking the box.” squares, without your neighbors knowing everything about your wages – why not take it?’ he said.